By Iain Withers and Simon Jessop
LONDON (Reuters) - Britain's biggest domestic bank Lloyds (LON:LLOY) said on Thursday it would not support direct financing to develop new oil and gas fields, joining a small number of lenders to push back on funding expansion of the industry.
Lloyds updated its climate policy to make the change, which bars project financing or reserve-based lending to greenfield oil and gas projects, although the policy would still mean it could provide general lending to companies in the industry.
Although Lloyds exposure to the sector is small, the move reflects growing pressure on banks to do more to accelerate the global transition to a low-carbon economy before the next round of global climate talks in Egypt in November.
It also comes just weeks after Britain pledged to give a green light for fresh exploration in the North Sea amid concerns about security of energy supplies amid the conflict in Ukraine.
Despite concern from campaigners that banks are helping lock in climate-damaging emissions, large lenders in the United States have faced political pressure to maintain the flow of capital and most continue to finance expansion in the sector.
Others that have tightened lending policies recently are Dutch bank ING and French lender La Banque Postale.
Climate groups welcomed the Lloyds move and called on other British banks to follow suit.
"Lloyds' new policy marks an important turning point in the dangerous relationship that exists between leading UK banks and fossil fuel companies," said Tony Burdon, chief executive of pressure group Make My Money Matter.
"By becoming the first of the five largest UK high street banks to stop the direct financing of new gas, oil, and coal projects, Lloyds is making a clear statement on the future of financing for fossil fuel expansion."
Lloyds' exposure to dirty industries is smaller than some of its global rivals, given its focus on Britain's economy.
The bank provided about 1 billion pounds ($1.1 billion) of finance to commercial oil and gas customers last year, according to its latest climate disclosures report, and the sector accounted for just 0.2% of its overall lending.
($1 = 0.8872 pounds)